CS155b: E-Commerce

1. CS155b: E-Commerce Lecture 19: April 19, 2001 B2C E-Commerce (continued) (Acknowledgement Helen Chiang)

2. 1 Browse Catalog Order Form Digital Offer 3 2 Amazon E-Commerce Service Transaction Processing Infrastructure 4 Request Auth 7 8 Issue Auth Request Clearing 5 Request Auth 6 Issue Auth 9 Clear Txtn. Online Buyer Buyer’s Browser Purchasing Triangle Merchants B2C Purchase Map Amazon.com Website Commerce Service Provider (iCOMS) CSP (iCOMS)Open Market Transact Software Payment Processing Mainframes Payment Processor Buyer’s Issuing Bank Issuing Bank Mainframe Acquiring Bank MainFrame Merchant’s Acquiring Bank Stanford Web E-commerce Technical Overview (B2C) 2/2/00

3. B2C E-Commerce Information Systems Bricks and Mortar environment Users Millions of users on day one • Functionality • capacity • continuous availability Causal Store Visitors Prospecting Store Visitors Behavior not recorded or analyzed Ad/Market Target Behavior only recorded it they become actual customers Ad/Marketing Targets Bricks-and-Mortar Customer Relationship Management (CRM) Systems typically record and analyze at least some of these behavior profiles Store Customers B2C e-commerce environment users Casual site visitors Prospecting Site visitors Ad/Marketing targets Registered Site Users Site Customers Note the increased scope of possible behavior analyses in an e-commerce User Relationship Management System E-commerce User Relationship Management System record and analyze all aspects of user behavior

4. Targeted-E-mail Search Engine Getting external user acquisition method Advertising (web, print other) Web Application servers Toll-free call center application servers General Internal User Access Interfaces User-behavior-driven web page presentation Targeted User Modification Mechanisms User-behavior-driven web ad banners User-behavior-driven call center scripts Order-entry, tracking and fulfillment status User/Customer Fulfillment Interfaces Site user behavior analysis and behavior modification Financial Reporting Enterprise Management Interfaces 5 Business Activity Categories 12 Fulfillment Mechanisms Marketing Trends

5. Targeted-E-mail Search Engine Advertising (web, print other) Web Application servers Toll-free call center application servers User-behavior-driven web page presentation User-behavior-driven web ad banners User-behavior-driven call center scripts Order-entry, tracking and fulfillment status Site user behavior analysis and behavior modification Financial Reporting Life After Fulfillment External user acquisition systems and media Internal front-end web servers Call center front-end servers Operational order entry/order fulfillment back-end servers Enterprise financial management system Clickstream/call stream data warehouse

6. Principle Goals of E-Commerce Information Systems • Highly available and highly scalable operational infrastructure • Massive-scale clickstream/call stream data warehouse • Alignment of information technology vendor and e-commerce enterprises business goals

7. Trends in E-Commerce Solutions • Early adopters of B2C information systems spent large amount of time and money to customize solutions. • Now, merchants and Web-application-server vendors are focusing on vertical markets and tailoring offerings to meet specialized business needs. • Software solutions will differentiate themselves by focusing on different vertical markets and by the way they choose to link components of their solutions.

8. B2C Infrastructural Software • $3.1B market in 1999 • Projected to grow to $14.5B by 2003 • Broad price range • Low-end to mid-range products: <$50K • High-end: $100K - $1M • Two types of vendors • “Usual suspects”: IBM, Microsoft, Netscape • Start-ups: Blue Martini, Open Market, Broadvision

9. Technical and Business Challenges • Ideal: Platform core and customized periphery. • Core still not standardized • Customization still very expensive (because it’s labor-intensive) • Patents • “One-click shopping” (Amazon) • Online credit-card verification (Open Market) • Legacy technology, especially dbs and other “back-end” modules

10. Blue Martini • Blue Martini Software, Inc. • 2000 Sales (mil): $74.3 • 1-Year Sales Growth: 561.1% • 2000 Net Income (mil.): ($62.1) • 2000 Employees 473 • 1-Year Employee Growth: 101.3%

11. IPO • IPO • 25 July 2000 • 7.5 million shares • Offering Range - $16.00-18.00 • Actual offering price - $20.00 • First day closed - $54.78 • Offering Amount $150 million • Price at Close (4/18/01) = $2.48 (52 week low)

12. Products and Services • Develops and sells software for e-marketing, e-merchandising, e-service • Also offers training, consulting, and support services • Software provides eCRM applications • Helps companies understand, target, and interact with customers and business partners across multiple “touch points.” • Touch points include websites, mobile wireless devices, online trading exchanges, traditional touch points (stores, call center).

13. Strategy • Provide a comprehensive packaged software application • simplify deployment • accelerate time-to-benefit • reduce total cost of ownership • Target large, vertical markets where brand management is paramount • retail, manufacturing, financial services, telecommunications, consumer goods, media

14. Software Functionality • Enables companies to author, manage, approve, and track development and use of content e.g., graphics, text, video, audio) • Enables companies to conduct business over multiple channels, including taking orders and managing returns • Software analytic capabilities increase companies’ abilities • to identify market segments • to target customers by analyzing purchase histories and modeling customer behavior • to target customers across multiple touch points with meaningful and relevant products, promotions, content

15. Stock Performance (Comparison Index: NASDAQ)

16. Revenue and Net Income

17. Revenues (cont.) • Quarter Ended March 31, 2000 • Revenue total = $10.7 million • 57% derived from licensing • 43% from training, technical support, consulting services • In 1999 (all quarters) • Revenue = $11.2 million • 64% software licensing • 36% related services

18. Open Market • Open Market, Inc. (NASDAQ: OMKT) • Founded, 1994 Anticipating growth of commercial side of Internet • 2000 Sales: $89.0 million • 2000 Net Income: ($37.8 million) • 52-Week High: $19.63 • Current Price: $0.88

19. Company History • 1996 • Despite sales of only $1.8 million in 1995 • Market capitalization skyrockets to $1.2 billion on IPO • 4 Million Shares @ $18.00 by Goldman Sachs • Product cost upwards of $1 million, but customers who wanted to set up shop on Net had few alternatives • Industry Leaders and Market Leader

20. Stock Price NASDAQ

21. Revenue and Net Income

22. Competitive Landscape

23. Geographic Financials

24. Mistakes (in retrospect) • 1997 and 1998 • Too much emphasis on large, complex websites • Ignored huge emerging demand for easy, fast e-storefront creation • Spread too thin geographically (25 countries) • Misguided acquisition of Folio Directed effort toward “publishing tools” just as market for e-commerce software was taking off

25. New Product Focus • Announced March 2001 • Content Server Enterprise (CSEE) (“Integrated Suite of E-business Solutions”) • Built on top of mainstream Java tools sold by other vendors • Two core technological components: • Content Server • Power Asset (“presentation neutral” content warehouse)